THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

COLLEEN MCEDWARDS, CNN INTERNATIONAL ANCHOR: Tainted by murder. The brutal death of a British student casts a shadow over a picturesque Italian town. JONATHAN MANN, CNN INTERNATIONAL ANCHOR: Quite a scare on the high seas as a luxury ship full of tourists hits ice, taking on water.

MCEDWARDS: A country without a president -- why political squabbling may soon leave Lebanon leaderless.

MANN: And shop until you drop. Americans and Europeans crowd U.S. malls hunting for bargains on Black Friday.

It is noon in New York, 6:00 p.m. in Perugia, Italy.

Welcome to our report seen around the globe.

I'm Jonathan Mann.

MCEDWARDS: And I'm Colleen McEdwards.

From Aruba to Sydney, Beijing to Madrid, wherever you are watching, this is YOUR WORLD TODAY.

Well, Italian police begin tracking him from a bloody fingerprint, and now they say there is more evidence putting him at the scene of a murder that has made international headlines.

MANN: Here's latest in the investigation into the killing of British exchange student Meredith Kercher.

Prosecutors say DNA tests shows the latest suspect, Rudy Hermann Guede, had sex with Kercher the night she was killed. Now here's a crucial question. We don't know yet whether she was raped or the sex was consensual. Guede is being held in Germany right now, awaiting extradition to Italy, and he is denying involvement in the murder of Kercher, who was found stabbed in her bedroom a few weeks ago.

Another suspect, Kercher's American roommate, has made a jailhouse statement, a confusing one, to be sure. Amanda Knox says she and her boyfriend, who's also a suspect, were getting high, smoking marijuana the night in question. She says her memory is hazy and "My head is full of contrasting ideas." But she insists she is innocent. Another man under investigation in the case has actually been released.

MCEDWARDS: Well, as this story unfolds, the shock is deepening for this historic university town where it all took place.

Jennifer Eccleston went to Perugia, Italy, where some say there is a darker side to this town's idyllic image.

(BEGIN VIDEOTAPE)

JENNIFER ECCLESTON, CNN INTERNATIONAL CORRESPONDENT (voice over): With its arched passageways, narrow streets, fountains and medieval spires, Perugia could hardly be more picturesque. If you're looking for a taste of Italian culture, it couldn't appear more perfect. But sometimes appearances are deceiving.

CASSANDRA SHEPHERD, STUDENT: I think a certain part of what happened in Perugia disillusioned our idea of how the fairytale land that Perugia presents itself to be...

ECCLESTON: Nineteen-year-old Cassandra Shepherd from New York is studying Italian language and culture. So is her friend Anne Riley, a 23-year-old from Illinois.

ANNE RILEY, STUDENT: We pictured this a safe little city.

ECCLESTON: Cassandra and Anne are two of the more than 8,000 foreign students that come to Perugia for a once-in-a-lifetime experience. An experience now overshadowed by the sexual assault and brutal murder of fellow exchange student Meredith Kercher.

SHEPHERD: It's crowded a little, but not enough to disillusion me from the idea of being in another country and learning another culture and other people.

ECCLESTON: Part of this experience is this: kicking back after a long day at school and hitting one, if not more, of Perugia's student- focused bars. And for American students under 21, it's an opportunity to drink. There is no age limit in Italy for drinking alcohol.

But the Kercher murder and details that have emerged about the use of drugs by the student suspects has led to suggestions of a much darker side to Perugia's night life. Perugia's mayor is fighting off those suggestions.

"Perugia is not a town of debauchery. It's a cultured town in which students live, study and have fun."

The perception of too much fun, however, could hut his city's bottom line. Exchange programs generate huge revenues for Perugia. Mayor Locchi admits his town has drug problems, but, he says, so do most towns around the world.

Even so, the murder and uncertainty over who was responsible has made many female students here anxious.

C.C. WEBSTER, STUDENT: Now I don't walk to my front door without looking around my shoulder and making sure no one's there.

UNIDENTIFIED MALE: And ever since this happened, it's very nerve-racking, kind of, to have to walk the 15-minute walk we have home from any relative bar to our house.

ECCLESTON: Each one, they say, watching the other's back. Sadly, the students say, Meredith Kercher didn't have anyone watching hers.

Jennifer Eccleston, CNN, Perugia, Italy.

(END VIDEOTAPE)

MANN: Another mystery and some new developments. A Dutch college student suspected in the disappearance of American teen Natalee Holloway is en route to Aruba.

Prosecutors say Joran van der Sloot and two other men were re- arrested Wednesday because of what they're calling new material in the investigation. That evidence though has not yet been publicly revealed, so we still don't know what it is.

The three men were reportedly the last to see Holloway as she left a nightclub back in May of 2005. They're now charged with involvement in her involuntary manslaughter, or causing serious bodily harm resulting in Holloway's death.

The two other suspects, brothers Deepak and Satish Kalpoe, are scheduled to appear in court in just the next few hours. The judge is to decide whether there's enough evidence to keep them in custody.

MCEDWARDS: Well, the temperatures were freezing, the conditions were treacherous. More than 150 people on board The Explorer are just thankful to be alive right now. The cruise ship was just wrapping up an ecological tour of Antarctica.

It struck a chunk of ice that tore a hole in its hull. A Norwegian cruise ship that happened to be nearby responded to the distress call.

SUSAN HAYES, G.A.P. ADVENTURES: It hit some ice and began taking on some water. The pumps were managing the water, but the decision was made that all the passengers should be evacuated for their safety.

VAN MARSH: The Liberian flagship was cruising near the South Shetland Islands when the crew put passengers on lifeboats. The passengers, from more than a dozen countries, later transferred to another ship and are being taken to Chile. There are no reported injuries.

MIKE MULFORD, RAF SEARCH AND RESCUE: You cannot underestimate how difficult it is when a ship gets into trouble in somewhere like the Antarctic. You've got cold, you've got distance, you've got the fact that there will be no helicopters locally. You've got a lot of time before the next ships can come along. And I think really it's quite a wonderful moment tinged with sadness, of course, but it is really tremendous that these people have been saved.

VAN MARSH: The tourists had signed up for a 19-day luxury tour with a crew, tour operators say, that was experienced.

JOHN WARNER, G.A.P. ADVENTURES MARKETING MANAGER: The MS Explorer was built in 1969 and was the first passenger expedition ship, and has been going -- and, in fact, has a pioneering history of going around those waters.

VAN MARSH: According to the International Association of Antarctica Tour Operators, that history has not been without incident. The organization reports that in 1979, MS Explorer, then registered as the Limblatt (ph) Explorer, grounded on the rocks to the west of the Antarctica Peninsula.

This voyage was billed as a cruise beyond the Arctic Circle where tourists could learn about some of the more dramatic expeditions in a remote corner of the world. But for the passengers and crew on the MS Explorer, this adventure was also more dramatic than they ever could have planned.

Alphonso Van Marsh, CNN, London.

(END VIDEOTAPE)

MCEDWARDS: It certainly was.

And if you could help us out with our coverage of this, please, do. If you were on board The Explorer, you can contribute by sending us your photos or your video of the evacuation. We always appreciate the pictures our viewers send to us to help us cover stories.

Just log on to CNN.com/ireport. Please, though, this reminder, as always. Keep yourself safe. Don't take any risks to send us those pictures.

MANN: Lebanon is about to become a country without a president, at least for a week. And there are very real concerns that the political deadlock could well plunge Lebanon back into crisis.

Emile Lahoud has been president for nine years, but his term in office expires in a few hours from now. So far, pro and anti-Syrian lawmakers have been unable to agree on who will replace him. They failed again Friday. They say they'll try again November 30th, but there could be a dangerous vacuum until then.

Our Beirut bureau chief Brent Sadler joins us now to help explain what happens next.

Brent, as I understand it, there are three different scenarios that are possible. We're going to work through them with your help. The first is that the president creates a whole new government, an alternative government. That would be Emile Lahoud appointing a government and Prime Minister Siniora basically having to go along, fight it if you can. Lebanon has had two alternative, two opposing governments before.

He is a staunchly pro-Syrian president. And if he were to take the unconstitutional move of trying to establish a government that will be tilting towards Syria, that will be seen politically in this very divisive situation here as a preemptive political strike against the parliamentary majority that tried for a fifth time today to convene a parliamentary session to pick a consensus presidential candidate. And in that case, the parliamentary majority could go for a simple majority of just one in parliament, one MP, and choose a rival government. That would indeed be a very dangerous road for Lebanon to embark upon, and it would really raise shadows, echoes of what happened back in 1989, when there were two rival governments in the middle of the civil war here, and that really was a very bad situation.

MANN: Lebanon's a complicated country. It's got a complicated constitution. But the second alternative is right out of the constitution. If there is no sitting president, scenario number two, Prime Minister Siniora basically takes temporary power. The government, the prime minister, replaces the absent president.

Could that work?

SADLER: Well, yes, constitutionally that could work, but given that Lahoud and the anti-Syrian camp in this country says that the western-backed prime minister, Siniora, is unconstitutional himself, since all the Shiite members of the cabinet walked out over a year ago, then that could be open to some conjecture. But under the constitution, power should pass to the western-backed prime minister and he should be able to govern the country until a president emerges from this political chaos. Again, no guarantees on that -- Jonathan.

MANN: And you're talking about political chaos. The fear is it will turn into bloody chaos on the ground. And so there's the third alternative, which is that President Lahoud actually asks the military to intervene.

How likely is that?

SADLER: Well, and many analysts and those within the political cabinet that supports the prime minister here hope that may well happen, that the army will essentially be given the authority to maintain stability in this country during these crucial hours and days that follow the expected departure of President Lahoud. In essence, the army could, then, tacitly support a continuation of Prime Minister Siniora in office. That, in essence, would freeze the situation and it would give the warring political camps another week to come up with a possible compromise candidate.

Meantime, many, many Lebanese tonight and in the coming days will be feeling that the situation here is indeed anxious, it is desperate, and they are hoping for some resolution. If not tonight, clearly, then perhaps next week. But that's anybody's guess, once again -- Jonathan.

MANN: And the clock is ticking.

Our Beirut bureau chief, Brent Sadler.

Not a pretty picture any way you look at it. We'll be keeping a close eye on the story.

MCEDWARDS: Well, a reluctant Saudi Arabia and other Arab states have agreed to attend next week's U.S.-sponsored Middle East peace conference, but the Saudi foreign minister said that he would not toller what he called theatrics -- things like handshakes with Israeli officials. And he said the gathering must make serious progress. Arab participation is seen as a huge boost to Washington's efforts to revive the stagnant peace process.

Well, they're saying that French president Nicolas Sarkozy has won his first big battle. Still ahead here on YOUR WORLD TODAY, he stood up to those striking transit workers, but he does face a tougher battle, reforming his country.

And later, holiday shoppers often running in the United States. We will show you the action, and we'll tell you also about the hottest toys for the gift-giving season.

Stay with us. Much more ahead.

(COMMERCIAL BREAK)

MCEDWARDS: Welcome back to YOUR WORLD TODAY.

After a crippling nine-day strike, transport workers are back on the job in France. That is good news for commuters, of course. For the first time in days they enjoyed an untroubled trip to work. Unions agreed to discuss scrapping special pension privileges in the transport and energy sectors.

There is still tension here, though. Sorbonne University, for example, the oldest university in Paris, was shut down Friday because of violence between students who were protesting the reforms and those who simply wanted to get to class.

MANN: So how do you say, "I told you so" in French? The president, Nicolas Sarkozy, pledged to press ahead with his ambitious economic reform plans Friday.

MCEDWARDS: Some commentators say the president has certainly passed a groundbreaking first test, at least. MANN: You can see that look in his face, actually. Others say Mr. Sarkozy may have won this fight, but faces a long battle to do more with the French society.

Jim Bittermann has more.

(BEGIN VIDEOTAPE)

JIM BITTERMANN, CNN SR. INTERNATIONAL CORRESPONDENT (voice over): It's not so difficult to lampoon French president Nicolas Sarkozy, but his adversaries are finding it much harder to get the better of him. From the beginning, he said he was going to introduce the reforms necessary to modernize French, and then directed his government to remodel pensions, the university system, the judiciary, the public service, and other sectors of French society.

His first battle was over pension privileges enjoyed by a select group of transport workers. A tough group but an easy target since most French agreed they shouldn't get special attention. For a week the strike tied up France and the ever-present president seemed to disappear, leaving his government, as French presidents often do, to take the flak.

Then he turned up at a high-profile meeting to say he was not giving in, just as the unions agreed to leave the streets for the negotiating table. As the rank and file trickled back to work, even those opposed to Sarkozy's politics, like the political editor at the left-wing daily "Liberacion," concedes Sarkozy appears to have won the opening round.

UNIDENTIFIED MALE: It's been surprising, and it's a big change in French politics. He's always a step in front. But the other aspect, that he's moving quickly from one subject to the other.

BITTERMANN: Other analysts say by taking on fights where a majority of his countrymen are on his side, fights where the president can claim victory, Sarkozy will further improve his image as a winner. But they predict he may have a harder time when he cuts closer to the bone.

ROLAND CAYROL, CSA OPINION POLLS: It is important for French population after six years of this inability to have this kind of style.

BITTERMANN (on camera): But then the substance has to come.

CAYROL: Then the substance has to come, and that's the problem we are facing now.

BITTERMANN (voice over): Sarkozy's next battle may be on education reform with university students. But while they've been noisy, not many are taking to the streets, and do believe they can do much without the labor unions.

(on camera): By making all of these reforms at once, Sarkozy ran the risk of simultaneous confrontations. But now that he's gotten through the first big one with the transportation unions with some success, it may make it easier taking on the others one at a time.

Jim Bitterman, CNN, Paris.

(END VIDEOTAPE)

MCEDWARDS: Well, China's population and its economy are booming.

MANN: And with that growth comes a growing demand for glamour. Ahead on YOUR WORLD TODAY, China's lust for luxury and what that means for retailers.

MCEDWARDS: And it was the insult heard around the Spanish- speaking world. When the king of Spain told the Venezuelan president to shut up, who knew it would become so popular across Spain?

(NEWSBREAK)

(COMMERCIAL BREAK)

JONATHAN MANN, CNN ANCHOR: Welcome back to our viewers joining us from more than 200 countries and territories around the globe, including the United States.

MANN: And I'm Jonathan Mann. Here are some of the top stories we're following this hour.

New evidence in the murder of British exchange student Meredith Kercher. The Italian prosecutors say DNA tests show the latest suspect, Rudy Hermann Guede, had sex with Kerchner the night she was killed. Unclear, though, whether the sex was consensual. Guede is being held in Germany awaiting extradition to Italy and he says he's innocent.

MCEDWARDS: A cruise ship touring the Antarctic hit ice and began taking on water. All 154 passengers and crew onboard were rescued. A Norwegian cruise ship nearby responded to the distress call. The ship is still listing severely. It is slowly taking on water.

MANN: The political cries in Lebanon is getting even worse. President Emile Lahoud's term expires in four and a half hours, but the parliament says it won't meet again to try to choose his successor until November 30th. Lebanon is in danger. The fears, it may slide back into civil war once again in pro and anti-Syrian lawmakers can't figure out who the new president will be.

MCEDWARDS: Well today marks Black Friday. It sounds kind of dire until you know what it's about. It's actually one of the biggest shopping days of the year in the United States.

MANN: They call it Black Friday because it's the day that businesses hope they'll go from the red into the black. That's how important this day is. Stephanie Elam is in New York, fresh back from I guess Bloomingdale's, Barney's? Where have you been this morning, Steph, and how are investors treating you today?

MCEDWARDS: How much did you spend?

STEPHANIE ELAM, CNN CORRESPONDENT: I have been at my house and here at work. I am not shopping today because it's just too crazy out there. Have you guys already -- are you guys going out right after the show today?

MCEDWARDS: Not a chance. The only shopping I'm be doing is online, I'll tell you.

ELAM: That's not a bad idea. But, you know, it's a huge day for U.S. retailers, Jon and Colleen, no doubt. Black Friday often sets the tone for the rest of the holiday shopping season. And like those consumers rushing the stores at the crack of dawn -- look at them -- stocks are on the move today as well.

Let's take a look at the numbers. The Dow Industrial on the upside by 156 points. It's up about over 1 percent there, 12,953. The Nasdaq tacking on 34 points at 2,596. And the broader S&P also on the upside by 23 points at 1,439.

U.S. financial markets were closed Thursday for the Thanksgiving holiday here in the United States. And today it's a shortened session we're looking at as well with the NYSE closing in less than a half hour at 1:00 p.m.

Meanwhile, Goldman Sachs is reportedly aiming to raise billions of dollars for what would be one of largest ever hedge fund launches. The Financial Times says Goldman is looking to raise $4 billion to $6 billion as it tries to rebuild its reputation in the hedge fund arena. Goldman's Global Alpha Fund took a big hit over the summer amid the turmoil in the financial markets. The new fund will focus on selecting stocks rather than use quantitative methods as the previous fund did.

That's the latest from here on Wall Street. Jon, back to you.

MANN: Stephanie, have fun shopping.

ELAM: Oh, why thank you.

MANN: This season is off to a rip-roaring start as best we can tell. We've been seeing the video from here. Savvy shoppers out before the crack of dawn, raising hopes, as we've mentioned, for retailers who dream of putting their balance sheets into the black. We go now to Allan Chernoff watching the action at a mall in Long Island, New York.

Allan, I can hear it's noisy. Is it busy, too?

ALLAN CHERNOFF, CNN CORRESPONDENT: It is extremely busy. In fact, we were here last year. And I have to tell you, it certainly seems busier right now than it was exactly this time last year. In fact, my colleagues who were here early this morning say, even at 5:00 in the morning, there were thousands of people here, if you can believe it, for some of those door-buster sales.

Now I know everybody's been talking about how the American consumer is in big trouble. Even "Businessweek" magazine saying the consumer here is getting crunched. Of course, we've had rising gasoline prices, heating oil prices rising and home values declining. But over here on Long Island, we don't seem to see much evidence. At least not at least on this day, Black Friday, the day that traditionally -- traditionally -- retailers go into the black and start making their profits.

Let's talk to just a few consumers and see how they're doing here. As you can see, we've got quite a few bags of gifts over here. Some lucky kid. And I think we found the mom over here.

What's your name, ma'am?

DONNA (ph), SHOPPER: Donna.

CHERNOFF: Donna. And, Donna, a lot of people are worried about those rising gas prices. Is that affecting you at all this season?

DONNA: Not at all.

CHERNOFF: No. Are you cutting back in any way?

DONNA: No.

CHERNOFF: Just going for broke?

DONNA: Yes.

CHERNOFF: And what do you get the kids? What are they . . .

DONNA: They went to Build A Bear Workshop. They got every they wanted.

CHERNOFF: Build A Bear. Can I borrow it? Oh, what type of bear did you make? You don't remember. It's going to be a big surprise come the holidays so inside of that box.

But certainly you haven't cut back at all because of the tight circumstances here.

Thank you so much.

Well, Jon, as you can see here at least, at Roosevelt Field Mall, a lot of busy shoppers and the day is just getting going. Plenty of shopping hours left. Back to you.

MANN: Looks like a circus there. Allan Chernoff, thanks very much.

Our i-Reporters have been sending us pictures of all of the merchandise madness. Jong Kung sent us this video from one of the Black Friday sales at a department store in New York City. Look at this. These people, they aren't being packed in there by force. This is all voluntary human behavior. Jong says that the lines are long, the tempers are short as shoppers try to grab some of those great deals. Grab some oxygen! I mean, can you breathe in there?

MCEDWARDS: It is a bit crazy, but, you know, it's all about this. Some say it's better to give than to receive even. And that is definitely true when it comes to giving to kids. Let's get more now on some of the gifts that keep on giving. And for that we turn to Jim Silver. He is editor-in-chief of "Toy Wishes." He comes to us from New York, surrounded by what we think are going to be some of the hottest toys of the season, right?

JIM SILVER, EDITOR-IN-CHIEF, "TOY WISHES": These are already hot, flying off the shelf.

MCEDWARDS: OK, Jim, you pick first. Let's start by describing one of the ones you think is going to be one of the big sellers.

SILVER: All right. This is Guitar Hero III. You know, it's a follow-up to Guitar Hero I and II and it's already blowing out of the shelves. It's available for Wii, PlayStation III and xBox. And it lets a young child be a rock 'n' roll guitar hero.

MCEDWARDS: How much noise does it make?

SILVER: Well, it really make as difference whether they play well or poorly. So you do want them to practice because when they don't play well, and I know this from experience, it sounds awfully bad!

MCEDWARDS: Indeed. And Hannah Montana is big in person, of course. How about the doll form?

SILVER: Oh, the doll is absolutely huge. It's the hottest selling doll on the market. It's a singing doll. And let's see if we can get her to work. You press her button and she sings "Best of Both Worlds." There's a couple of versions. There's a sound stage. And just like her concert tickets, all her products are blowing out.

Transformers are huge, too. I have to say, I love these things. I find them fascinating.

SILVER: It's based on the movie. Ever since the movie came out, the products have been really hot. And the leader is the Ultimate Bumblebee. Bumblebee was the star of the movie. And Ultimate Bumblebee is like having that buddy from the Transformer movies at your house. He lights, he has weapons, and he transforms into a really cool Camaro.

MCEDWARDS: What's a good age group for that one?

SILVER: That's about five and up. MCEDWARDS: Yes. OK. There you go.

The Eye Clopse (ph) toy. OK. You might have to convince me on this one. Why would I want to give this to anyone?

SILVER: Eye Clopse is a great activity toy. You plug it into your television and what it does is it makes -- shoots something 200 times up close. So you can look at a check and see where it says authorized signature. You look at money. If kids look in the carpet they will see things that will horrify parents. And, I mean, my kid looked at my whisker and they said I'm never aloud to do that again. It was -- the things that you see up close and the things that you find is just amazing.

MCEDWARDS: Yes, I can imagine it would be fun. Be very careful when you point the thing, right?

SILVER: Oh, without a doubt.

MCEDWARDS: How's the quality on it?

SILVER: It's a great quality. It's a good toy from Jack Specific (ph).

MCEDWARDS: You know, that's the thing, I think when parents go to buy toys because so often we get something that kids really wanted, it's on their list, they ask for it, ask for it but they play with it once or twice and then, you know, it's kind of done for. Do most of these toys have some staying power, do you think?

SILVER: You have to look for something that has great play value. Take this Barbie Girls. Barbie Girls is an MP3 player that will plug into the computer and bring a young girl to a website. And this website, you can go shopping. You can have pets. You can decorate your home. It's all -- you can collect clothes. You have a closet. You can redecorate where you live. And kids will go back. They have over 6 million registered users and kids are actively spending a lot of time. So it's just not a five-minute toy. Plus, you also have an MP3 player. So toys are going just from an item to interacting with the web.

MCEDWARDS: Yes, got you.

Jim, we got it leave it there. Jim Silver, thanks a lot. Cool stuff.

SILVER: Good being with you.

MANN: We're going to take a break. And then coming up, well, we're going to move toys behind and talk about a place where really it's no game.

MCEDWARDS: Calling for reinforcements. For years NATO forces have been fighting the Taliban in the mountains (INAUDIBLE) of Afghanistan.

MANN: It's a battle they say they may lose if they don't get more boots on the ground and fast.

And later, a royal, rude remark has Spain's mobile phones ringing off the hook. We'll explain.

(COMMERCIAL BREAK)

MANN: Welcome back.

Even in remote Australia, politicians press the flesh and kiss the babies. Now the campaign is over down under and the voters are in charge.

MCEDWARDS: They sure are. Polls open in a little less than four hour there and the choice is between Labor's Kevin Rudd and Prime Minister John Howard, one of George W. Bush's closest allies and also a supporter of the U.S.-led invasion of Iraq.

MANN: And it could be a much closer race than anyone expected. Hugh Riminton is there.

(BEGIN VIDEOTAPE)

HUGH RIMINTON, CNN CORRESPONDENT, (voice over): Striding into the future or walking into oblivion. John Howard is the only leader of those who carry the argument for war in Iraq still seeking re- election. But the polls say that time might just be up for the man of steel. The name bestowed by his good friend, George W. Bush.

KEVIN RUDD, LABOR PARTY LEADER: I want Australia to be a leader.

RIMINTON: His opponent is Kevin Rudd, a Chinese speaking former diplomat who wasn't even in parliament when Howard became prime minister. He has run a low-risk campaign, stressing economic discipline, the needs of working families, and change in Iraq.

RUDD: The time has come to implement an exit strategy for our combat forces.

RIMINTON: But Iraq has not been dominant in this campaign and the Howard government has presided over more than a decade of strong economic growth with record low levels of unemployment. So if it's not the economy, stupid, what is it? Analysts say voters are fatigued with a man they've come to know so well. He's lost ground with cuts to worker entitlements and even the weather has gone against him.

Sydney Harbor may be one of the world's great waterways, but Australia as a whole is in the grip of the worst drought on record. Climate change has emerged as a huge issue in this election and it's a Labor opposition that's had the better running with it. In fact, this Howard administration could go down in history as the first western government to fall, at least in part because of global warming.

One leading conservative commentator says there is a lesson here for U.S. Republicans.

PIERS AKERMAN, CONSERVATIVE COMMENTATOR: Oh, I think that climate change is definitely a vote winner with the younger voters these days. You must be aware of it and you must have a coherent policy to address it.

RIMINTON: The opinion polls in the final hours have been narrowing. John Howard says if he does win, he will quit in the next term, allowing him to retire undefeated as prime minister. If he gets that chance, expect a sigh of relief strong enough to knock flat the yachts on Sydney Harbor.

Hugh Riminton, CNN, Sidney.

(END VIDEOTAPE)

MANN: Well, Hugh mentioned that Iraq is an issue in the election. An Australian soldier was killed in a firefight with Taliban forces in Afghanistan Friday. The third member of the country's 900-strong force there to die in combat.

MCEDWARDS: That's right. The Australians are part of NATO's International Security Assistance Force. Now this is a force that is getting smaller just when commanders say it ought to be getting larger.

MANN: It is a big problem and threatens the entire project there. Our international security correspondent Paula Newton reports now from Afghanistan.

(BEGIN VIDEOTAPE)

PAULA NEWTON, CNN CORRESPONDENT, (voice over): They're taking the war to them. House by house. In the words of combat soldiers here, squeezing the Taliban until they can't breathe. But as fast as NATO forces can clear them, Taliban lie and wait and retaliate with still more savage tactics, soldiers say, using civilians, even children, as human shields.

UNIDENTIFIED MALE: You see? They can use that as a detonator.

NEWTON: Laying deadly trails of IEDs, improvised explosive devices, and suicide attacks are back in record numbers. This doesn't look like progress. To get that, still more troops must take on the Taliban.

UNIDENTIFIED MALE: Contact with the Taliban. And (INAUDIBLE) that we are (INAUDIBLE).

NEWTON: Here they taunt Dutch NATO troops by radio. "We are the sons of George Bush," they say. And they will get the better of allied troops if reinforcements aren't found and fast. NATO commanders couldn't be more blunt.

GEN. JOHN CRADDOCK, NATO SUPREME ALLIED CMDR., EUROPE: It will take longer, it will be more expensive in terms of cost of killed and wounded to every nation participating.

NEWTON: Afghan civilians couldn't be more desperate. "If you let the Taliban back," this mula (ph) pleads, "you might as well have not come at all."

NATO's secretary general took all this in as CNN was given exclusive access to his tour of Afghanistan. For months he's been waging a losing battle of his own. He wants more NATO allies here and isn't getting it. Dutch and Canadians are considering pulling out. Other allies are refusing to take on combat roles.

NEWTON: It's very clear that some of the contributing countries are running out of patience.

SCHEFFER: Yes and it's up to me and up to others to say, if you're now running out of patience, you'd spoil a very worthwhile process.

NEWTON: This is a turning point for Afghanistan. Development has been slow but consistent. Taliban could change all that.

And so what's being discussed more and more now in Afghanistan is moving beyond the military options into something that might be just as risky -- engaging, negotiating, with the Taliban.

President Hamid Karzai now says he's been increasing his contact with some Taliban leaders, including a half dozen times just this week.

HAMID KARZAI, AFGHAN PRESIDENT: We are willing to talk to those of the Taliban who are not part of al Qaeda or the terrorist networks. Who do not want to be violent against the Afghan people.

NEWTON: This efforts towards reconciliation (ph) is extraordinary and it's motivated by what goes on every day in the battlefields here. NATO forces still win every time they take on the Taliban. Problem is, they could still lose the war.

Paula Newton, CNN, Kandahar province, Afghanistan.

(END VIDEOTAPE)

MANN: This is important stuff, but we are going to tell you about something. Well, sometimes affairs of state are -- they're just funny. This isn't a particularly important thing we're going to tell you about, but . . .

MCEDWARDS: It's on another level, I think.

MANN: So, stay with us because you'll love this story. It's Spaniard reviving the angry retort heard around the world and relishing it with every ring.

MCEDWARDS: Yes. Cell phone are buzzing with the Spanish king's snap at Venezuelan President Hugo Chavez. You wondering what it is? (INAUDIBLE) listen in.

(COMMERCIAL BREAK)

MANN: How cold is it in Belgium? Well, not really all that cold, but it won't matter for this particularly frosty destination. A fairy tale world made entirely of snow and ice.

MCEDWARDS: You've got elves, you've got rabbits, wizards, other fairy tale creations. They were made by artists from as far away as China and Canada as well. The lighting is gorgeous!

MANN: There's even a spider web castle -- I think we saw a shot of that -- and a talking tree. All of this, 300,000 kilos of ice, 400 tons ever snow.

MCEDWARDS: Beautiful. That hand is just majestic. The festival started today. Artists are busy putting on all the final touches. And if you are wondering how they keep from melting, since it's not all that cold in Belgium right now, they're actually inside a tent, right?

MANN: Kind of spoil some of the fun, but they keep it five degrees below freezing just to make sure the thing lasts long enough for people to enjoy it.

MCEDWARDS: Working away there. You see them chipping and chipping, chipping away. It's just beautiful.

MANN: We do that in Canada, actually, where I'm from.

MCEDWARDS: Yes, when you're trying to get your car out of the driveway to get to work. Not nearly quite so romantic.

MANN: Ice sculpture in the snow.

MCEDWARDS: It's certainly not a conventional way of announcing a caller, is it? It's a rather rude ring tone actually and it's taking Spain by storm.

MANN: Uh-huh. If you wonder why the people of Spain really love their king, truly love their king, this story will tell you why. The ring tone asks, "why don't you shut up?" And if you're asking why so many Spaniards want this on their cell phones?

MCEDWARDS: Well, it all goes back to a heated spat between their king and a president many Spaniard believe had it coming.

"The king said it," says this student. He got it on his phone last week from a friend.

UNIDENTIFIED MALE, (through translator): How many times have I heard it? Fifty time. Every time someone calls me.

GOODMAN: The Spanish mobile and Internet company Zed says the shut up ring tone has been a record breaker in sales.

MIGUEL LOPEZ-QUESADA, ZED EXECUTIVE: Everybody knows the king. Secondly, I think that it was something which was very human. I think it was from his gut when he reacted. So it was emotional. I don't think that -- it was kind of funny.

GOODMAN: This Zed specialist prepared the shut up product, downloading the king's audio from YouTube and then adding special musical effects.

UNIDENTIFIED MALE, (through translator): It's something the king said and very well said to Chavez.

UNIDENTIFIED MALE, (through translator): This is going to stay with me forever, until my phone breaks.

GOODMAN: But this cell phone industry analysts thinks most consumers are more fickle than that.

SANTIAGO PEREZ, CELL PHONE INDUSTRY ANALYST, (through translator): The market is geared to the moment. What's in demand now. People could be very interested today but not next week.

GOODMAN: It's easy to download a ring tone. You just send a message from your phone requesting it. And soon it's here. "Why don't you shut up?" I've been told that myself a few times.

Why don't you shut up, Spaniards seem to be silenced by it.

Al Goodman, CNN, Madrid.

(END VIDEOTAPE)

MCEDWARDS: You could tell Al Goodman really enjoyed saying that right to the camera.

MANN: Everyone's enjoying it. And, you know, how many people in Washington wish they could say that to Hugo Chavez?

MCEDWARDS: Yes. Good point.

MANN: We're going to move on. What did you pay for breakfast today? I'm asking that because a previously unrecorded Ross Child Faberge egg goes under the hammer next week in London.

MCEDWARDS: Yes, don't panic. Not literally under the hammer. But one buyer is going to have to lay down a record price for this gold and enameled piece. Just look at it.

MANN: Yes, it's expected to fetch about $18.5 million when it gets sold at Christi's.

MCEDWARDS: This egg is just one of about 12 that was known to have been made for people outside the Russian imperial family. It is rare indeed.

MANN: Look at that guard. I mean spend his day guarding an egg. But it's worth a little (INAUDIBLE). Every hour it pops out, flaps its wings, nods its head and crows.

MCEDWARDS: I would imagine those are jewels on its beautiful tail and wing. It is truly exquisite.

MANN: Television doesn't really do it justice because if you've been lucky enough to travel to Russia, you can actually see these in the museum and they are exquisite.

MCEDWARDS: Yes, takes your breath away.

That's it for this hour. I'm Colleen McEdwards.

MANN: And I'm Jonathan Mann. This is CNN.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com